IRC 104(a)(2) Tax Exclusion 2010 Hearings

by Structured Settlement Watchdog

"The structured settlement industry should not lose sight of its chance to influence the regulations actually proposed by the Treasury (Department)"-

As they say "out of the mouths of babes", or in this case "Babs". I'm of course referring to 3rd year NYU law student Jeremy Babener. Babener does a nice job in his recent commentary about the upcoming IRS hearings concerning the IRC 104(a)(2) tax exclusion by appropriately helping to shift the focus away from the "Handbags at Dawn" between the NSSTA and IRC 468B "stickybeaks" Dick Risk and Jack Meligan and to emphasize the common cause instead of the non sequitur (Babener -"this debate focuses on hypothetical regulations that the Treasury has not proposed"). Here Here!

Briefly, the proposed regs would:

• Eliminate the requirement that damages be based on “tort or tort type rights” in order to qualify for the section 104(a)(2) tax exclusion, and
• Incorporate 1996 legislation requiring that personal injuries and sickness damages be “physical” in order to qualify for the section 104(a)(2) tax exclusion.

Various industry advocates have used the IRS public comments process to suggest improvements to IRC 104(a)(2) that would expand the exclusion to damages resulting from:

1. rape committed under threat of bodily harm, and
2. other situations where traditional physical injury torts occur without unwanted or uninvited physical contact or observable bodily harm.
3. damages for the defendant causing acute physical illness by a stressful work environment.
4. wrongful imprisonment greater than one year (even without proof of observable bodily harm).

On November 28, 2009 it was reported by TSSG Executive Director, Patrick Hindert, that "Richard Risk, an attorney who advocates for single claimant QSFs, interprets the decision to remove the single claimant 468B project from the Priority Guidance Plan as evidence that sufficient guidance favoring single claimant 468B QSFs already exists. Risk points to I.R.C. § 7805(d) which requires the Treasury Secretary to “prescribe all needful rules and regulations for the enforcement of [the Internal Revenue Code].” Risk concludes that Treasury’s decision is an acknowledgment that additional guidance is not “needful.”  

So why all the fanfare and the premature drum rolling by Risk and Co?  It was clear that it was deemed necessary when substantial donations were solicited to pay for Skadden Arps legal fees.

 NSSTA Offers Ricci Response to IRS on Risk's Single Claimant 468B Fandango